Boardwalk Empire, Baptists and Bootleggers, Public Choice

I’ve just watched the first two episodes of the HBO television series, Boardwalk Empire, and I’ll certainly watch the rest of the episodes from the two seasons so far, and the upcoming third season. The show is largely the creation of Terence Winter, with a lot of input from Martin Scorsese, who directed the first episode.  The star is Steve Buscemi, well known from cinema.  The show reflects the growing number of made for subscription channel television shows which cross the boundaries between  television and cinema with regard the quality and scope of acting, directing, writing and so on.

In the first episode we see Buscemi’s character Nucky Thompson (a bad man but also a likeable person) address a temperance meeting in Atlantic City just before the Prohibition of alcohol came into force in the United States.  Nucky makes a rousing speech to condemn the evils of alcohol, and includes a story from his childhood about an alcoholic father who brings home dead rats as food for the family.   We learn very quickly after the speech that Nucky drinks alcohol, that he made up the story about the father, that he is a prominent politician in Atlantic City, and he is a leader of criminal activities in the city.  We learn that alcohol will continue to be sold in Atlantic City, and the rest of America, but at a higher price because of Prohibition, and inevitably it will be a way for criminals, including corrupt politicians, to enrich themselves.

This is the perfect illustration of the Bootlegger and Baptists theory of the Clemson University economist Bruce Yandle.  Click here for a pdf of one of his papers on thesis.  Click here to listen to an audio interview with Ross Roberts at the Econtalk site, and to access related links.  The interview is worth listening to for the folksy southern charm alone.

The B0otlegger and Baptist thesis refers to the way that disfunctional laws and regulations emerge through tacit alliances between the self interests and those with high moral intentions.  So Prohibition legislation comes partly from Baptists, and other religious groups, who find alcohol morally repugnant; and partly from the gangsters who specialise in supplying alcohol, bootleggers, for financial reasons.  Enoch ‘Nucky’ Thompson is the perfect embodiment of the thesis since he gets political support from ‘Baptists’ (in the broadest sense) and money from bootleggers.  That shows clearly why politicians may favour such bad laws, and the show also deals with the agency set up to enforce Prohibition, creating another group with an interest in Prohibition.

Other examples of  Baptist-Bootlegger situations include prohibition of drugs and clean energy legislation.  That is not to say that all clean energy legislation is a bad thing, but it starts with high minded environmental activists, and is then likely to be shaped by economic interests who want to create a market for new kinds of energy technology, and may not have the wish for the best possible technology for the environment in mind.  Perfectly decent people who have interests in companies which invest in new energy technology will end up lobbying for legislation which suits that company, and therefore all who work for it and invest in it.  Big companies tend to be more favourable to expensive regulation than small companies, because the price of entry into that sector of the economy is increased which reduces competition.  There are many variations on Baptists and Bootleggers and many like Nucky who intermediate between them in outrageously hypocritical but profitable ways.

This is an example of public choice theory in economics, political science and political economy.  It is particularly associated with the ‘Virginia Public Choice Theory’ of Nobel Laureate James Buchanan and his associate Gordon Tullock.  It has many precedents, going back at least to David Hume and Adam Smith.  For Buchanan and Tullock, and most self-proclaime public choice theorists there is a goal of reducing the scope of the state, but there is no reason why these arguments cannot be taken up by those who wish to maintain or increase the size of the state, but also wish to make sure the state serves general interests, and provides properly defined public goods, rather than handing out favours to influential groups so that the public interest collapses under the weight of purely sectional privileges which restrict competition, innovation and variety.   Analysis of this kind does happen, but there is room for there to be more of it, for it it to be more sharp in criticism and focused on those concerns.  Left leaning analysis of the weakening of the public good by sectional interests, the regulation of the economy for the benefit of insider groups, is a lot more soundly based than attacks on some fantasy of ‘market fundamentalism’.  The supposed period of market fundamentalism since the 1970s has in fact been a period of increased regulation and state spending.  Some of the most extreme forms of state domination of the economy have weakened, but that is matched by the increases in spending and regulation.  The left-wing criticisms of ‘neoliberalism’ often concentrate on market fundamentalism, when the best line of attack would be point out that claims to free market purity are always ideology, that market economies are always conditioned by alliances between the state and privileged economic interests.  Left critics of neoliberalism do sometimes make those kind of comments, but are not always consistent about it.

More awareness by left critics of market liberalism of public choice (that is the capture of public choice by sectional interests) would be a good thing, as would more awareness by some on the free market libertarian side of ho deep the public choice processes are, so that we are better off trying to mitigate them in the direct of public goods, rather than indulge in unrealistic hopes of abolishing them.  Boardwalk Empire is a good illustration of how badly things can go wrong when public choice is directed away from public goods, and shows in highly dramatised and extreme forms, the basic structures of this process.





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